Mum & Dad are Fighting
Quick Hits from GRIT
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SIX things you need to know this week in 60 seconds.
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*as of 4pm ET, 10/21/21
Last Friday, Jack Dorsey made a wild claim, saying hyperinflation was not only coming, but already happening. Dorsey’s a brilliant entrepreneur, but that doesn’t make him an expert on macroeconomics.
This week, Cathie Wood disagreed with him and did the rest of Twitter the courtesy of backing up her argument. Here are the takeaways on why she says deflation is coming, rather than inflation:
Technology (the most potent deflationary source) - causes costs and prices to decline, which reduces the velocity of money and its inflationary sting
Creative destruction thanks to disruptive innovation - many companies who leveraged balance sheets to manufacture EPS and ignored innovation will be forced to service debts by selling obsolete goods at discounts (deflation)
Prices will wind down after holidays - businesses caught flat-footed by pandemic will have caught up and face excess supplies
GRIT’S TAKE: Call me crazy, but it’s possible that the truth lies somewhere in between the extremes of deflation and hyperinflation (which is no joke — look at what it does to countries like Venezuela and Zimbabwe).
GRIT’S ACTION: Stocks are one of the best inflation-hedges. Stay long my friends.
Under the Radar
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2. DEALS & IPOs
Gamers are the new rockstars
Faze Clan is a gaming company that has become popular among Gen Z and Millennials by partnering with famous personalities like Ben Simmons (NBA), Bronny James (Lebron James’ son), Kyler Murray (NFL), and Lil Yachty (rapper), and Juju Smith-Schuster (NFL).
What started over 10 years ago as a group of YouTubers playing Call of Duty has turned into one of the biggest eSports companies in the world that will be going public via SPAC merger next year.
They literally gamed their way to a BILLION-dollar valuation!
GRIT’S TAKE: Faze Clan’s combination of top gaming talent and influential personalities has captured over 350M users worldwide which they’ve leveraged into ~$50M a year in revenue through brand partnerships with companies like McDonald’s and General Mills.
GRIT’S ACTION: I own a couple esports companies trading at significantly less than Face Clan’s 20x revenue multiple. Upgrade to PAID to see which!
3. STOCK MARKET
Big tech earnings recap
Over the last year, global equities have seen inflows of over $1T and a good chunk of every one of those dollars goes right into FAAMG. Let’s see how they held up in Q3:
Company-formerly-known-as-Facebook: $3.22 EPS vs. $3.19 est; $29.01B revenue vs. $29.57B est; adding $50B to its buyback program
Amazon: $6.12 EPS vs $8.92 est; $110.81B revenue vs. $111.6B est; Q4 forecast sales growth disappointing, between 4-12%
Apple: $1.24 EPS vs $1.24 est; $83.36B revenue vs. 84.85B est; says Q4 will be largest in terms of revenue in its history
Microsoft: $2.27 EPS vs $2.07 est; $45.32B revenue vs $43.97B est; Azure and other cloud services grew 50% YoY in the quarter
Google: $27.99 EPS vs $23.48 est; $65.12B revenue vs. $63.34B est; Ad revenue rose 43%, cloud division rose 45%
GRIT’S TAKE: The numbers from big tech continue to impress (for the most part — looking at you Bezos and Cook), but they’re not quite as explosive as the figures we’ve been getting spoiled with over the last several quarters.
GRIT’S ACTION: Long all 5.
It’s going to be a bumpy ride to net zero
Stockpiles at the biggest oil hub in the U.S. at about half of what they were 1 year ago and down to levels we haven’t seen since 2018. Cushing, OK is just one example, but widespread shortages just like it means that the transition to net zero will be a bumpy one.
Meanwhile, the carbon offset market is expected to DOUBLE next year to over $1B. What is it exactly? Here’s an ELI5:
You plant 10 trees that reduce atmospheric carbon by X and issue a credit that states this. A third party confirms that you actually planted the trees and certifies the credit. A company then buys this credit from you and uses it to reduce their net carbon emissions by X.
GRIT’S TAKE: Every major company has some sort of pledge to help get us to net zero and these credits are an easy way for them to demonstrate their efforts without getting their hands dirty.
GRIT’S ACTION: Up +500% on my NETZ. Also own (private) Base Carbon which I am told I am now up 2-3x on!
Reddit & GameStop definitely know their customers
The website that gave rise to memes and the company that turned into one are jumping headfirst into the NFT game because of course they are. It would be weird if they didn’t, honestly.
Reddit is looking to hire a senior backend engineer for its NFT platform that would “design, build and ship backend services for millions of users to create, buy, sell and use NFT-backed digital goods”.
The OG meme company is putting together a blockchain and NFT team for their own platform in which “future creators won’t just build games but also the components, characters, and equipment. Blockchains will power the commerce underneath”.
GRIT’S TAKE: Knowing their customers and acting quick may just pay off — NFT trading volume has already topped $15B this month!
GRIT’S ACTION: Who is doing NFT stock certificates? I want to invest in that company.
Meta is committed to the metaverse
Facebook Reality Labs (FRL) is the team that is dedicated to making Mark Zuckerberg’s vision for the metaverse a reality.
I can’t imagine what that vision might look like seeing as we’re about as close to defining the metaverse as we are to finding out who killed JFK, but it sounds like it’s going to be expensive.
Faceb— excuse me, “Meta” is investing $10B this year alone in FRL which will go to creating the AR, VR, software, content, and whatever else goes into the metaverse (which is everything apparently).
GRIT’S TAKE: It might seem like a large amount for something that can’t even be accurately described yet, but some estimate that the metaverse could be worth $82B by 2025! This shows Faceb—damnit, Meta’s commitment to making the metaverse a reality is serious (they literally just changed their name to Meta!).
GRIT’S ACTION: If you’re not investing in the metaverse. Have fun staying poor.
3. CNBC (FB), CNBC (AMZN), CNBC (MSFT), CNBC (GOOGL)
6. The Verge
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